Dive Brief:
- Flowers Foods is positioning the bread and pastry maker’s portfolio to withstand an uncertain future tied to consumer use of GLP-1 medications, its top executive told analysts last week.
- The Dave’s Killer Bread manufacturer recently pointed to weakness in the bread space and noted that while it’s difficult to point to a specific cause, potential options include healthier eating trends, an economic slowdown and the growing prominence of GLP-1 drugs.
- Flowers CEO Ryals McMullian said in prepared remarks tied to the company’s fourth-quarter earnings that consumers are moving away from traditional white and wheat bread into other categories, such as differentiated and premium items, that the Georgia company has invested in recently.
Dive Insight:
While Flowers’ bread and butter may be white bread, the iconic staple is becoming a smaller part of the company’s future.
McMullian noted Flowers is moving its portfolio toward foods that are better for you and have cleaner labels, which are all part of an effort to align its offerings with the needs of consumers. These include Dave’s Killer Bread, an organic offering with no artificial ingredients or preservatives, and Grand Canyon, which focuses on gluten-free products.
Recently, Flowers purchased better-for-you snacks maker Simple Mills for $795 million. The purchase improved the bread maker’s growth prospects and diversified its portfolio with the addition of crackers, cookies, snack bars and baking mixes made from healthier and recognizable ingredients.
Simple Mills, Dave’s and Grand Canyon are among those that could benefit if GLP-1 medications prove to be a long-term trend, which is far from certain.
McMullian pointed to research showing that while consumers using GLP-1 drugs initially purchase less food and shift more of their purchases to nutrient-dense items in the store perimeter, that doesn’t last. He noted that people taking GLP-1 medications for weight loss ultimately reverse course and end up spending even more on center store items than before adoption.
“I don’t think anyone has gotten this completely figured out yet or knows what the long-term implications of it are,” McMullian said. “I think the important thing to note is that regardless of the outcome, we’re positioning our portfolio to be successful in any environment.”
A study released in January found GLP-1 drug use cuts grocery spending by 6%. Purchases of calorie-dense, processed items, such as chips, baked goods and cookies, were the most affected. Roughly 14% of U.S. adults have taken GLP-1 drugs to lose weight or manage diseases like diabetes.
McMullian said much of the pressure in bread has focused on sweet baked goods and traditional loaf products, such as white and wheat. At the same time, buns and rolls, breakfast and premium products have outperformed.
Flowers’ other brands include Nature’s Own and Butternut breads as well as indulgent snacks, such as Tastykake and Mrs. Freshley’s.
“We are targeting our innovation at those more promising areas,” McMullian noted. “That investment is paying off, as each of our major bread brands gained or held unit and dollar share in the fourth quarter.”
